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It’s Still the Economy, Stupid

Author's Note: Dan has offered that I can crosspost from DemConWatch, so you'll be seeing some of my articles. I'll also be writing some posts on local politics. This article is from DemConWatch, and the companion article cited at the end can be viewed here.

Obama's Debt Commission is due to report in November, albeit after the election. Theoretically, “everything” is on the table: debt reduction via raising the retirement age, a VAT tax, changes to the monies spent to support home ownership. All the stuff you read about. But somehow, they don't seem to include the things that I'd personally like to see. The “sacred cows” that don't even get mentioned. So here are a few things I'd like to see the Debt Commission consider:

Dock Congressional salaries. Each Senator and Representative makes $174,000 exclusive of benefits. or $3,346/week. The IIE wants to do away with the lame duck session. They give themselves a good 10 weeks a year to go home and see the folks. Well, I say, give these guys and gals 4 weeks a year for vacation, junkets, home trips, and then start docking their salaries for not being in Washington doing the jobs they are paid with out tax dollars to do. Plus, they seem to only work 3 days each week so they can go home on weekends. I'd let them have a travel day each week, and then cut the salaries 20% for the other day. I'm not joking. They're paid to work. Golf doesn't count.

Raise the Federal gas tax. It's currently 18.4 cents/gallon and hasn't been raised since the early 1990's. Do you know anything else that hasn't been raised in close to 20 years? No, you don't. It costs money to repair roads, bridges and tunnels, and that's what the gas tax is for. We all howl about energy independence: raise the gas tax, even just to 20 cents/gallon, with escalator clauses of one penny a gallon each year for the next five years. It's a negligible cost at the pump, but would help the economy, help fix our infrastructure and encourage people to drive smarter.

Let the Bush tax cuts expire for the rich. People are generally against this for some reason. I'm pretty sure that it's because they can't do math. I can do math. Old math. You can play with tax rates here. For a single person, the top rate of 35% begins at $373,650 AGI. Returning that to 39% would mean an additional tax of $287/week. A lot of money if you earn $20,000/year. NOT a lot at close to $400,000/year.

Abolish ethanol subsidies. The cost and pollution and damage to waterways (and the Gulf) from chemical runoff isn't worth it. Sugar cane is better than corn as a gasoline additive in terms of yield, cost, and less pollution.

End the wars in Afghanistan and Iraq.Today. Just plain bring the troops home. This would save trillions.

Make it illegal for an individual to retire on Friday, and work as a contractor in the same job on Monday. This happens all the time: the military being the greatest offender, although it happens in all levels of government. You retire, collect a pension, and then also keep your job at a higher salary with no benefits (which you get with your pension.) It's called double-dipping, and it's just plain wrong. Want to retire at 53 with 25 years? Fine. Retire. Just don't keep working AND collecting pension and benefits.

Make the retirement age 65. While I'm opposed to raising the age to receive Social Security from 65 to 70, I think it's perfectly reasonable to disallow people from collecting beginning at age 62 for straight retirement. There are people who cannot work due to disability at all ages, and the number of disabled people rises with age. If people cannot work due to disability, they can collect SSI/Disability until they turn 65.

Cut corporate welfare. Right now, the tax codes allows a company to be based in the United States, have plants/outlets here, but also produce goods or provide services overseas. They can shelter corporate income from US taxes by paying the other countries (at a lower rate) and then deducting the percentage value (not the dollar value) from their taxable income. The right is against changing the percentage charged for these companies because they say it would cause more off-shoring. So, change the structure. Set up the system so that corporations are taxes on 100% of income for goods and services sold in the US, but allow them credits for the amount spent on payroll in the US, and pay a penalty for monies spent on goods procured, and salaries paid, in other countries. For example, GM produces cars here and in South America, Canada and Asia. GM shelters the portion of income based on the cars manufactured elsewhere, but sold here. They would now pay taxes on the value of the income for the cars sold here, but would get a discount on the rate for the cars produced using American raw materials, parts, and assembled here, and would pay a penalty for every car that they import. Side effect: more cars produced here, more people employed, more people who can afford new cars. Go figure.

Change housing policy. Right now, home owners get a tax benefit for the interest paid on mortgages. Renters get nothing. Home ownership is a value that the government has been supporting since the end of WW2. They have done this not only by underwriting the cost of mortgages via the tax code, but also by backing the mortgages via Fannie Mae and Freddie Mac, who now hold about 90% of all mortgages. This led to mortgages being resold as derivatives, and we all know how well that turned out. The thing is, a 30-year, fixed rate mortgage is a bad deal for a bank. If interest rates rise, they're paying more for deposit accounts, but receiving less (relatively) from their mortgages. If rates fall, people refinance. Therefore, the only way the banks would sell these mortgages was with government backing. Before WW2, most mortgages had a term of 5 – 6 years, and required 50% down.

The idea after WW2 was to build stable communities (think Levittown) and nuclear families. That worked well when people held the same job for 40 years and then retired with a corporate pension. But now, with people changing jobs every two years (up until the recession), people move more to go where the jobs are. It's easier to move when it means getting out of lease, as compared to selling a house. The house-selling problem only exacerbated in a down-spiral market.

Those are my ideas. Please use the comments to list your choices for ways to reduce the national debt, or to say why you think my ideas are wrong. Later today, I'll be posting my idea on what we should be spending money on.